TOKYO, Nov 5 Toyota Motor Corp nudged
its full-year net profit forecast up to $9.7 billion, even as it
put the cost of recent anti-Japanese protests and a slowing
economy in China, the world's biggest autos market, at lost
sales of 200,000 cars.

Sales at Toyota and its two Chinese joint ventures almost
halved in September and October amid often violent protests in a
dispute over ownership of islets in the East China Sea. Honda
Motor's China car sales more than halved last month,
while Nissan Motor's fell 41 percent.

Toyota said on Monday the impact of the drop in sales would
cost it 30 billion yen off its full-year net profit. It sold
around 900,000 vehicles in China last year.

While Honda last week cut its full-year net profit forecast
by a fifth to take account of the China damage,
and Nissan is expected to follow suit when it releases its
July-September results on Tuesday, Toyota has found room to
revise its forecasts higher as it traditionally gives more
conservative earnings guidance and relies less heavily on China
sales.

China accounts for around 12 percent of Toyota's sales,
compared to Nissan's 27 percent and Honda's 20 percent. The
backlash in China against Japanese goods allowed Hyundai Motor
and BMW to pick up market share.

Toyota increased its net profit forecast for the year to
end-March to 780 billion yen, up 2.6 percent from its previous
guidance. It said full-year operating profit would be 1.05
trillion yen, up a touch from its earlier forecast for 1
trillion yen.

July-September net profit more than trebled to 257.9 billion
yen ($3.2 billion) on solid sales in North America and Southeast
Asia, beating an average estimate of 228.8 billion yen from six
analysts polled by Thomson Reuters I/B/E/S. A year ago, Japanese
manufacturers were still reeling from the March earthquake and
tsunami.

"It's uncertain when sales will recover in China. It's
unlikely to happen anytime soon ... I think the market hopes for
a recovery in January-March, but I don't really see what's going
to drive that," said Kei Nihonyanagi, autos analyst at Barclays
Securities in Tokyo.

BIG IN AMERICA

In its biggest market, the United States, Toyota's sales
rose 16 percent in October from a year ago,
giving it and its Lexus luxury brand a 13.9 percent market
share, up from 12.3 percent. Toyota said it hopes to sell 2
million vehicles in the United States, a market it sees growing
to 14 million vehicles.

The Camry was the third-best selling vehicle in the United
States in October after Ford's F-Series pickup truck and
GM's Chevy Silverado, and led the mid-sized family sedan
category ahead of Honda's Accord and Nissan's Altima.

Toyota and its group companies sold a total of 7.4 million
vehicles worldwide in January-September, beating GM and
Volkswagen to be the top selling carmaker. Toyota
was the world's biggest automaker from 2008 through 2010, and
could this year regain top slot after recovering from a series
of crises - from the global financial meltdown and damaging
recalls to natural disasters and the China row.

Toyota on Monday trimmed its forecast for global sales in
the year to end-March - excluding those at its Chinese joint
ventures - to 8.75 million vehicles from a previous 8.8 million.

Shares in Toyota, valued at nearly $135 billion - almost as
much as Honda, Nissan and Hyundai combined - are up by a quarter
this year, easily outpacing Honda's 4.5 percent gain, while
Nissan is flat. Ahead of Monday's results, Toyota rose 2.2
percent to their highest close in 6 weeks.

TIME TO CHANGE

Toyota, which blazed a trail for mass producing quality cars
but then tripped up by expanding too fast into the U.S. muscular
SUV and truck market at a time when the yen, too, was
rising, has been on a relentless cost-paring binge. Investors
now want to see real signs that Toyota is fixing its core
problem. As the company's president Akio Toyoda puts it: having
to make "ever-better cars".

Satoshi Ozawa, an executive vice president, said Toyota
expects further cost cuts during the current second half, and
predicts a 300 billon yen improvement in profits from the cuts.

While Toyota is again making money, profitability in its
core car business is much lower than its financial services
unit, which brings in just 5 percent of revenue, but a quarter
of operating profit.

"We are changing a lot from what we were. We want to prove
how we have changed through our products, and we want to ask
everyone to wait a little bit more," another vice president,
Mitsuhisa Kato, said in August.

"It's tough for Toyota to dominate the market again with its
current product line-up. It needs to improve overall product
attractiveness, including design and ride quality," said
Masatoshi Nishimoto, autos analyst at IHS Automotive in Tokyo.

MORE AGGRESSIVE

One sign of change is Toyota's more controversial designs
tested on recent models. For example: the "spindle grille" on
some luxury Lexus models - a prominent grille pinched in the
middle - gives the car a bolder, more aggressive look.

"We are starting to think about how we can produce cars that
stand out, rather than cars that are accepted by everyone but
have no unique identity," said Toyota designer Ryo Ikeda.

Another is the Toyota New Global Architecture (TNGA), a new
framework to build better cars and cut costs by developing
multiple models simultaneously to use more common parts. Shared
parts mean suppliers can produce a larger number of fewer parts,
cutting the unit price. The framework focuses on three
platforms, each carrying 8-10 models, Toyota employees said.

The first car to be fully developed by the TNGA will be the
revamped Prius for late-2014 release, followed by the subcompact
Vitz and the next generation Camry around 2016, analysts said.

As the global market evolves, Toyota is looking to
strengthen its foothold in emerging markets, and plans to double
its China sales to 1.8 million cars by 2015. It has positioned
Southeast Asia as a "second mother-base" after Japan.

Next In Market News

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